Product attributes and business models determine the difference of cost sensitivity. Different product attributes and business models make the cost sensitivity of different categories of popular products significantly different. Most of the costs of Volkswagen products are direct materials. According to the difference of cost composition, it can be divided into three types: single raw material sensitive type, multiple raw material composite type and packaging material sensitive type. We split the cost structure of different segments on the basis of the average value of various costs disclosed in the sample subject prospectus or the relevant data disclosed in the annual report of recent years: meat products, dairy products, baking, yeast and pickles belong to the single raw material sensitive type, and each has a high proportion of raw materials; Leisure snacks, compound condiments and traditional condiments mostly belong to the compound type of multiple raw materials; Soft drinks and beer are sensitive to packaging materials, and the proportion of packaging materials is higher than that of raw materials.
In this round of cost shocks, condiments, baking, beer and soft drinks have been greatly affected in the short term. Combined with industry data, we believe that the current cost pressures of condiments, baking, soft drinks and beer are relatively large. The average price data from January to February 2022 shows that the prices of palm oil, PET bottles and aluminum ingots have increased by more than 30% year-on-year. If the subsequent upward trend of prices continues, it may bring greater cost pressure to relevant downstream enterprises. The cost of dairy products is relatively controllable, and the cost of meat products (pork) and pickled mustard has been alleviated to a certain extent.
Profitability is the projection of the competition pattern in the long run and the game between cost rise and product price increase in the short run. In the long run, the profitability of mass products is jointly determined by the competition pattern (import and export barriers, stock players) and business model (industrial chain bargaining power and consumption attributes). The competition pattern is divided into three types: the track with clear competition pattern (soy sauce, meat products, pickled mustard, yeast, etc.), and the leading companies with full leading advantages are generally the builders and maintainers of the subdivided track business environment and business rules, rather than the initiator of vicious competition; In the face of cost pressure, most price increases are initiated by leading companies, followed by other players, thus forming a relatively benign downstream transmission; There are many powerful participants in the track of Oligarchic Competition Pattern (beer, dairy products, etc.). The core of investigating the price raising ability of this kind of track is to pay attention to the marginal change of the competition pattern. When the marginal benefit of the industry through homogeneous low-price competition decreases, the industry participants will focus more on product innovation and upgrading and take the lead in raising prices in the niche market, so as to improve profits; The competition pattern has not yet been finalized in the track (snacks, soft drinks, other condiments, baking, etc.), which is mostly seen in the track with rapid iteration of product and business model innovation. In the face of cost pressure, there is often no unified paradigm, and the price raising ability needs to be discussed in terms of the company’s category, efficiency, strategic stage and other dimensions.
In the face of rising costs in the short term, whether the price increase is smooth or not directly determines whether the track can relatively easily transmit cost pressure. After the complete experience of the cost cycle, it can also realize the upward improvement of profitability, that is, it objectively has a strong ability to transfer cost impact. Through the re disc historical data, the tracks with this feature include mustard, yeast, basic condiments, dairy products, beer, etc.
After the cost pressure cools down, which track’s profit improvement is more significant
The sectors with benign competition pattern and relatively strong ability to raise prices of categories are more likely to improve their profitability after experiencing the period of cost pressure. The resumption of trading history helps us clarify our thinking, but we should also avoid seeking the sword in the face of difficulties and carefully examine whether the real price raising ability of the sector has changed. It is suggested to focus on beer ( Tsingtao Brewery Company Limited(600600) , Chongqing Brewery Co.Ltd(600132) , Guangzhou Zhujiang Brewery Co.Ltd(002461) ), basic condiments ( Qianhe Condiment And Food Co.Ltd(603027) , Foshan Haitian Flavouring And Food Company Ltd(603288) ) and subdivided leading companies ( Chacha Food Company Limited(002557) , Chongqing Fuling Zhacai Group Co.Ltd(002507) , Angel Yeast Co.Ltd(600298) ). At the same time, focus on dairy products with marginal improvement of competition pattern ( Inner Mongolia Yili Industrial Group Co.Ltd(600887) ) and baking and catering supply chain with gradual product differentiation ( Zhengzhou Qianweiyangchu Food Co.Ltd(001215) , Ligao Foods Co.Ltd(300973) , Qingdao Richen Food Co.Ltd(603755) ).
Risk tips
1. The demand for repair fails to meet expectations and the market competition intensifies;
2. The upstream cost rises too fast.
